Competitiveness and Inventory Management:
To be competitive, many fast-food chains expanded their menus to include a wider range of foods. Although contributing to competitiveness, this has added to the complexity of operations, including inventory management. In what ways did the expansion of menu offerings create a problem for inventory management? One form of inventory is safety stock, which is primarily carried by companies to ensure a variety of products is available at all times. However, safety stock ties up capital and hinders cash flow.
As a manager, what recommendations could you provide to reduce inventories as it relates to safety stock?
What parameters would lead you to believe that (a) large safety stock, (b) small safety stock, and (c) zero safety stock would be advantageous for the organization? Be sure to provide examples and data in support.